Benefits of a General Partnership
- Ease of creation. No state filing is required. The partnership is created when the partners begin business activities.
- Low cost of operation. Because general partnerships are not formed by means of a state filing, they are not required to pay a formation filing fee, ongoing state fees or franchise taxes. The partnership must still obtain the business licenses and permits required for operation however.
- Few ongoing requirements. Unlike corporations, general partnerships are not required to hold annual meetings of the owners, issue partnership interest, and keep personal asset separate from business assets. Having a partnership agreement that outlines how the partnership will be managed, the roles of each partner, and what events will cause the partnership to end operations is recommended.
Benefits of a Limited Partnership
- Unlimited liability for general partners only. In a limited partnership (LP), at least one partner has unlimited liability—the general partner(s). The other partners (limited partners) have limited liability, meaning their personal assets typically cannot be used to satisfy business debts and liabilities. The amount of their liability is limited to their investment in the LP.
- Limited partners are not involved in management. The general partners oversee the day-to-day operations of the LP. Limited partners are basically silent investors.
- Short-term projects/ventures. LPs are often the business type of choice for special situations versus true businesses.
Benefits of a Limited Liability Partnership
- Professional service businesses. Limited liability partnerships (LLPs) can only be created by certain types of professional service businesses, such as accountants, attorneys, architects, dentists, doctors, and other fields treated as professionals under each state’s law.
Benefits of a Limited Liability Limited Partnership
- Protects the partners from liability when the partnership is exposed to a lawsuit.
- It provides asset protection. That is, when someone sues a partner, personally, it protects the assets inside the partnership from being taken by the judgment creditor of a partner. So, whether the lawsuit comes from within the company or directly attaches a partner, the LLLP can provide a legal barrier.